Server manufacturers face the most challenges in digital cinema. They carry the bulk of the burden of meeting the DCI test plan. And the nascent 4K market will create a new market for media blocks inside projectors that will shift the way server technology is packaged and sold.
Note that XDC, reviewed in the Deployment section, and Sony, reviewed in the Projector section, are also manufacturers of digital cinema TMS and servers.
DTS Digital Cinema, a division of DTS, was sold to the company now known as Datasat Digital Entertainment. There have been bumps in the road, however. In 4th quarter 2009, DTS sued Datasat for damages of “at least $8.75M,” for failure to make the deferred payment agreed to at the time of sale, and failure to meet revenue performance milestones. While it has bee rumored that the lawsuit was settled out-of-court, DTS has made no announcement of it.
In search of a server to sell, Datasat first entered into an OEM deal with Doremi for a DTS Digital Cinema branded version of its server. In 2009, Datasat switched to an OEM deal with Qube, whose co-branded server it now sells. Datasat also acquired a TMS from DTS, which it has since improved and added to its product line. The company retains its DBS exhibitor management system, and continues to sell and support the older DTS cinema audio products, and has introduced new cinema audio products.
Datasat has its challenges. In spite of efforts to build a presence in the digital cinema market, the company’s primary revenue continues to be film licensing, and film licensing will fall off sharply over the next 3-5 years. It’s unlikely that its current path will enable it to replace those revenues.
Digital Cinema Systems Corporation, aka Digicine, came into being to absorb the jointly developed assets of DTS Digital Cinema and Avica, following the acquisition by Datasat of DTS Digital Cinema. Digicine is in-process of purchasing the remaining assets of Avica.
The core design philosophy of Avica continues in the Digicine design, providing SMS software running on a Dell server with a 3rd party media block (by AJA or Mikrom). As media blocks move into projectors, Digicine’s long experience with the commodity design strategy should give it an edge.
Dolby Laboratories has struggled with its presence in the cinema industry since becoming a public company. MBA’s understand the high margin licensing business. They don’t understand a low margin business like digital cinema. With no plans to develop a 4K media block of its own, it appeared Dolby was preparing its exit for the cinema market. But around ShoWest time, management appears to have recognized the value of having a strong presence in an industry so close to the major studios. Dolby is now seeking a partner for 4K media blocks. The company plans to continue to sell married software and server, with media block in projector. Far from a retreat to commodity hardware, Dolby is still hanging on to its hardware roots. The company has a TMS, although limited to the management of a multiplex, and not connected to a back office system or designed to support B2B communications.
Digital cinema has been a challenge to Dolby, and it will continue to challenged. While it developed its name in cinema as a leader in audio, its strength in the cinema audio market is being attacked. Unlike audio for film, audio for digital cinema is straight forward and doesn’t involve proprietary technology. For this reason, new audio processors from QSC, Datasat, and USL could take market share from Dolby. Dolby itself opened the door for competition by helping Pixar with its new 7.1DS sound format for Toy Story 3, giving exhibitors a reason for upgrading their system.
Its 3-D glasses have not had the penetration that RealD and Xpand have achieved. While Dolby’s 3-D glasses produce a good image, they are light hogs, requiring a higher projected light level than other systems. But it has been successful in bringing the cost of glasses down. At ShoWest, Dolby announced a price of $17 for its glasses, a significant reduction. At Cinema Expo, Dolby introduced glasses with smaller lenses, which will cost even less. Overall, the degree by which Dolby will competitively price its products will indicate the degree to which management is willing to commit to cinema.
Doremi is clearly the market leader for digital cinema servers worldwide, quite a feat for a small privately owned company with offices in Burbank and France. The company works hard to maintain its position, adding new capabilities such as 4K in-projector media blocks and accessibility. Like Dolby, it focuses on selling married software and hardware, even with media block in the projector. It scored a winning sale with Cinemark, and is delivering a TMS as well. Note that its TMS is limited to the management of a multiplex, and not connected to a back office system or designed to support B2B communications.
Doremi still has the burden of its early installations in the US. The bulk of its 4000 servers installed under the Cinedigm Phase 1 plan must be changed out to meet the DCI compliance required of the deployment contracts. These are not just media block replacements, but wholesale server replacements. Cinedigm’s deployment agreements would have required Doremi to warranty its server for 10 years. If a server has a 5-year lifetime, then presumably Doremi built the cost of replacement into the price. The bet, then, is that both DCI compliance and warranty replacement will be handled in one go. Even so, this is still an expensive proposition.
Doremi’s biggest challenge is diversity and vision. Doremi makes servers for the cinema and broadcast market. It has proven itself to be adept at hardware, and has opportunities in this area. But it is the software market where Doremi will find growth, and where it needs to sharpen its skills.
GDC Technology, a subsidiary of publicly listed Global Digital Creations Holdings Limited in Hong Kong, has long been the Asian leader for digital cinema servers, and was the first to install digital cinema servers in China. It is the 2nd largest server manufacturer in the world. Its president, Dr. Man-Nang Chong, has steered the company wisely, creating a presence in Los Angeles near the Hollywood studios even when not focused on the US market. This was particularly beneficial in its negotiation with studios for digital cinema deployment agreements in Asia, which were signed early this year. In contrast, its regional competitor, Time Antaeus Media Group (which buys product from Doremi and Christie), does not have a presence in Hollywood for negotiating a VPF deal.
Like Digicine and Qube, GDC uses a 3rd party media block from AJA in its servers. Presumably, AJA is developing the company’s 4K in-projector media block. It is AJA that provides features such as in-server rendered captions and RealD in-server ghost busting.
GDC also sells a TMS for use with its servers. The TMS can directly source content to its servers without first ingesting the content to the server’s internal storage. But even though GDC is also a deployment entity, it has yet to take steps to commercialize its TMS and back office system.
Qube, a division of Real Image Media Technologies in India, offers both “E-cinema” and digital cinema servers. Its E-cinema products are targeted for preshows and exhibition of non-DCI compliant content. The company has achieved significant penetration in India, but also has installations in the US, Portugal, Puerto Rico, and the Czech Republic.
The company entered into an agreement with Datasat to supply servers wielding the Datasat brand. Datasat provides sales and marketing in the US and Europe, and inventories and supports the products.
Qube’s strengths are as a software company, and combined with its current path of employing commodity hardware, it has much potential ahead.